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Assume that Pam's utility function is given by u = 40I 0.001I2, where I is income. Pam has the choice of legal work that pays
Assume that Pam's utility function is given by u = 40I 0.001I2, where I is income. Pam has the choice of legal work that pays IL = $10,000 per year or illegal work that pays II = $20,000 per year. There is a 30% chance that, if Pam chooses illegal work, she will be caught and her income will be reduced to 0 per year. Find an expression for Pam's expected income from illegal activity.
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Microeconomics
Authors: Robert Pindyck, Daniel Rubinfeld
8th edition
978-0132870436, 132870436, 013285712X, 978-0133371178, 133371174, 978-0132857123
